eBay forces vendors to use its in-house bank

eBay will boost its profits by millions of dollars annually in Australia by forcing customers to use its subsidiary bank PayPal. And in some cases vendors may now have to wait up to three weeks to receive the proceeds of sales.

In a controversial move, eBay has announced that from 17 June, the popular online auction site will ban retailers from using their own merchant services to charge buyers for products and force all traders to open PayPal accounts.

PayPal is a wholly-owned subsidiary of eBay, which says five million Australians have already opened PayPal accounts.

eBay traders will no longer be able to use bank deposits, a popular means for non-commercial buyers to settle for purchases, especially those who do not wish to use credit cards.

From 17 June, eBay sellers will only be able to accept payment via PayPal, or cash on delivery, effectively up to doubling the cost of selling a product on the website.

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While bank transfers are free for either side, (providing they are not international transactions) PayPal will charge a flat 30 cent transaction fee plus a commission of between 1.1% and 2.4%. Low volume, low value traders will pay the higher rate. On a $25 sale that will add a further 93 cents to the existing eBay transaction fee.

eBay launched a PR offensive yesterday, emailing customers and issuing media releases announcing it was making trading on line “even safer”.

An eBay spokesman, who asked not to be name, told Inside Retailing Online that in the past transactions settled via PayPal were four times less likely to result in a dispute, and disputes were bad for buyers. “eBay can no longer be a bystander.”

But when pressed about the nature of the disputes, the spokesman could provide no further information or statistics.

Inside Retailing Online asked the spokesman to clarify how many traders would have to wait up to 21 days for their funds to be cleared.

“The holding of funds is going to be a rare case. It’s been put in place in high risk categories where sellers are being ripped off time and time again.”

But he would not name any categories. Pressed on the number of transactions he responded: “A tiny fraction of 1%.”

He said normal transactions via eBay would be settled “immediately”. When a buyer paid a seller using their PayPal account, the funds would be transferred to the seller’s account. The seller could then use those funds to buy other items on eBay or transfer the money into their linked bank account.

The spokesman confirmed that it took up to five days for PayPal funds to appear as cleared funds in a trading bank account “sometimes a bit longer” in the case of regional banks but stressed “the money is still yours. It is in your PayPal account.”

He confirmed eBay had held discussions with the Australian Competition and Consumer Commission, but declined to detail the grounds.

The ACCC might be interested in apparent restrictive trade practices, and “double-dipping” – eBay making sure it profited at both ends of the transaction and preventing any rival financial institution being involved in sales on eBay.

The spokesman acknowledged there would be “short term pain” in terms of customer relations, but he said eBay was focused on long term gains and improved security.

And there is a possibility the move may prompt Fairfax to look at ways of bringing its successful TradeMe online auction site across the Tasman to compete with eBay, giving traders greater choice of payment and trading terms.

Among sellers, there is widespread disillusionment – best summed up by Jock Adams, trader for four years, who told The Australian today: “I’ve never had to use PayPal because the existing system worked fine. I like selling on eBay but they don’t like me or the fees I pay them any more, so I suppose I’ll go elsewhere.”